FACTA Suits Still Bite - $31 Million Subway Class Action Settlement Approved

by Pillsbury Winthrop Shaw Pittman LLP

Pillsbury Winthrop Shaw Pittman LLP


  • FACTA suits remain an enormous potential threat.
  • Retailers may want to conduct periodic FACTA compliance checks.
  • Retailers that draw a claim should check their insurance coverage.

Ten years ago, hundreds of retailers, chain restaurants and others were targeted nationwide as defendants in class action suits under the Fair and Accurate Credit Transactions Act (FACTA) for violating the so-called “truncation” provision of FACTA. Under the statute, receipts may not contain the credit or debit card’s expiration date, or more than the last five digits of the card number. A “willful” violation of the statute results in statutory damages of $100 to $1,000 per transaction, often exposing defendants to multi-billion dollar claims. That first wave of FACTA litigation led to a mixed bag of motion to dismiss and class certification rulings. For example, in Soualian v. International Coffee & Tea, LLC, Judge Klausner in the Central District of California denied class certification on the basis that plaintiff had suffered no actual damages, while other courts in the same district certified classes.

Retailers ultimately benefitted from H.R. 4008, the “Credit and Debit Card Receipt Clarification Act of 2007,” which provided a form of a safe harbor protecting those caught unaware by the law. Unfortunately, while individuals have not suffered actual harm as a result of expiration date printing, FACTA class actions continue. The principal culprit appears to be software updates in point of sale systems, unmasking the expiration date. Since then, retailers have sporadically been caught up in FACTA class actions, and no longer benefit from the safe harbor.

In the case of Subway, it was sued twice in 2007, in 2008, and again in 2009. In 2016, more plaintiffs filed class actions against the operator of the Subway sandwich chain in California and Florida. Following the court’s rejection of Subway’s motion to dismiss, it entered into what appears to be a record-breaking FACTA settlement, approved March 23 by U.S. District Judge Cecilia Altonaga for the Southern District of Florida (Flaum v. Doctor’s Associates, Inc. 0:16-cv-61198).

The Subway litigation and settlement underscores that FACTA suits remain an enormous potential threat, strongly suggesting that retailers conduct periodic FACTA compliance checks. Other FACTA considerations include settlement strategy and format, as well as insurance coverage. For example, a 2010 FACTA suit against Fed Ex Office led to a class settlement allowing individuals who received offending receipts to submit claims. Although each claimant stood to receive a $50 gift card, only a tiny proportion ever submitted claims, making the theoretically large settlement nominal. A large proportion of the original FACTA cases in 2007 were fully covered by either general liability or private D & O insurance coverage despite initial denials. While some insurers adopted specific exclusions since 2007 to carve out coverage for FACTA claims, others have no carve out. The lesson? Check your receipts to avoid claims, and if you draw a claim, check your insurance coverage.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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